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Insurance Services Overview

Insurance Services Overview. John Ziambras Managing Director & General Manager. Insurance Services Overview. Division of NSCC Established in 1997 Link Insurance Carriers with Broker/Dealers, Banks, and other Distributors of insurance products

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Insurance Services Overview

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  1. Insurance Services Overview • John Ziambras • Managing Director & General Manager

  2. Insurance Services Overview • Division of NSCC Established in 1997 • Link Insurance Carriers with Broker/Dealers, Banks, and other Distributors of insurance products • Provide automated, centralized and standardized framework for information (data) exchange and money settlement • Support primarily variable annuity products

  3. Value Proposition • Reduce operating costs by eliminating paper and manual processes • Automate, standardize and streamline insurance processing and information exchange between carriers and broker-dealers • Help establish and automate compliance procedures • Aggregate money settlement: reconciliation of applications to premium dollars, and applications to commissions paid • Help distributors and carriers grow revenue

  4. Parties to the Transaction • Insurance Carriers • Manufacturers of insurance products • Distributors • Large NYSE firms, Banks & Independent Broker/Dealers who sell insurance products. • Solution Providers • Technology Vendors and Service Providers that offer services to carriers and/or distributors and enable them to connect to Insurance Services.

  5. Trading Partner X Trading Partner X Trading Partner Y Trading Partner Y Trading Partner Z Trading Partner Z Operational Benefits • DTCC Model • Automated processing solution for applications and subsequent premiums, addressing the needs of both insurance carriers and distributors • Central link • Efficient Distributor A Distributor B Distributor C Distributor C • Proprietary Model • Distributors and carriers use their own direct lines with multiple trading partners • Inefficient • Time Consuming Distributor A Distributor B

  6. Legal Framework • Variable life and annuity insurance products are considered securities under securities law • Insurance in the U.S. is regulated at the individual state level (51 different jurisdictions) • NSCC’s Insurance Services is regulated by the SEC. Need approval for all new services and changes to existing ones • Insurance Services is a non-guaranteed service. NSCC is under no obligation to settle on behalf of a participant if they cannot meet their settlement obligations.

  7. Annuities • A financial product manufactured by insurance companies • Investment & Insurance Hybrid • Premiums can be invested by customer in mutual-fund-type investment subaccounts. • Account value grows on a tax-deferred basis • Can be used to provide income at retirement age • Insurance company guarantees the income for a certain period (5, 10, 15 years, lifetime, etc.) • An important product for 78 million people entering retirement

  8. The U.S. Annuity Industry • $1.8 Trillion in assets • 67% variable, 33% fixed • $212 Billion of new sales (premiums) • $133B or 63% variable • $79B or 37% fixed • In 2006, DTCC processed $11 billion of VA premiums • Total VA contracts in force: 29 million • DTCC average daily VA Position records: 4 million

  9. Variable Annuity Sales by Channel

  10. Our Business Today • 53 Insurance Carrier “Families” –143 Companies • 175 Distributors • 28 Vendors & Service Providers • $11 billion in annuity premiums • $4 billion in annuity commissions • 8 different products/services

  11. Current Insurance Functionality • From Distributor to Carrier: • Applications/Premium (APP) • Subsequent Premium (SUB) • Licensing & Appointments (LNA) • From Carrier to Distributor: • Asset Pricing (AAP) • Commissions (COM) • Positions & Valuations (POV) • Financial Activity Reporting (FAR) • Automated Customer Account Transfer (ACATS/IPS) • Money Settlement (MSD / MSS)

  12. Core Existing Functionality Is rep eligible to sell carrier’s product? Pay the rep for selling carrier’s product. ACATS Positions and Asset Pricing (POV, AAP) Licensing & Appointments (L&A) Commissions (COM) Initial Application & Premium (APP) Subsequent Premiums (SUB) Financial Activity Reporting (FAR) Money Settlement Money Settlement Money Settlement Money Settlement APP Confirm USA Patriot Act

  13. Our Future • Continue to support insurance automation and work with our customers and the industry to enable Straight-Through Processing” or STP • Expand to more distribution channels, such as banks and independent broker/dealers, and to more product lines (life insurance & long term care) • Become a player in the retirement income space and benefit from the current demographic trends towards the use of annuities

  14. Thank You!! John Ziambras Office: 212.855.5651 E:mail: jziambras@dtcc.com Website:www.dtcc.com/products/insurance

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